Five years of positive growth and a well-diversified economy are helping Kenya’s economic performance
Kenya’s presidential election is due to take place on the August 8th, 2017 with the current President Uhuru Kenyatta attempting to win his 2nd and final term against Raila Odinga his main rival. The possible results of the election are making some investors feel anxious and whilst this nervousness from the investors is obviously having an adverse effect, and the country’s economic growth is becoming more sluggish than the growth rate of 6% seen in 2016, it is still expected to deliver similar levels of growth seen in the last five years of somewhere between 5-6%.
Aly Khan Satchu, the chief executive of Rich Management (an investment advisory firm) said “History shows that the Kenyan economy slows down in an election year by about 1.2-1.4 per cent. Typically, folks become cautious and adopt a wait-and-see attitude but as long as the political rhetoric stays below the radar, then we should be ok”.
The International Monetary fund (IMF) has a positive outlook due to the current governments investments
The International Monetary Fund (IMF) met in January 2017 to discuss the $1.5 billion precautionary arrangement it made with the Kenyan government in 2015, due for exportation in March 2018, however with the continued levels of confidence in the economy, no immediate changes to the agreement are expected to be made in the coming months, in fact the IMF even highlighted Kenya’s economic robustness.
During an interview in January 2017, Armando Morales a senior representative from the International Monetary fund said, “We expect a deceleration of growth for several reasons, but I think the most important reason we are considering is the potential impact of the interest rate caps on credit growth”.
President Uhuru Kenyatta has already made some very significant investments in the country’s infrastructure, including new railways lines and roads. These developments are almost guaranteed to help support the country’s continued economic growth no matter what the election result ultimately is.
Armando Morales then added, “We believe it is going to be a reasonable deceleration; it is not like the economy will lose momentum. It is only that there are other factors at play and especially, we are concerned about the potential impact of the interest caps on growth. If those numbers are based on data that is still very preliminary”.
Kenya’s economic diversification reduces the risks to its economy
All sectors of the economy are currently contributing to the economic growth seen in the first few months of 2017, however the intensification of the drought currently being experienced, particularly during the last few months of 2016 are causing concern.
The IMF is currently trying to encourage the government to abandon the interest rate cap that it introduced in September 2016 as it believes it could help improve the flow of credit and in turn benefit the country’s overall GDP.
Pictures : worldbank.org and Africanews